Do you read a post and spread the word by either creating your owner post or reblogging the post? Or do you read a post, do your homework to confirm the accuracy, and then create your own post?
In today's AR Newsletter, a post was shared written by Lenn Harley called "Are Mortgage Loan Origination Fees Deductible....."
Within the post, Lenn points out that Loan Origination Fees ARE deductible. The fact of the matter is that not ALL situations are the same. To her credit, Lenn does provide the IRS website and instructs her readers to check it out for more details. She even states to not listen to your Realtor or Loan Originator, but to contact a CPA or Tax Expert for clarification.
I too suggest contacting a CPA, but I wanted to share some helpful tips for when a Loan Origination is Tax Deductible and when it is not.
In today's market, the Loan Origination is more often the fee paid to the lender/loan originator for doing business with that company. The "Discount Point" is typically the fee that is applied towards getting a "below PAR" interest rate. In essence, paying a fee specifically to lower the rate from XXX to XXX. This is typically called a Discount Point or Discount Fee.
According to the IRS Site, a 'POINT' is defined as:
The term "points" is used to describe certain charges paid, or treated as paid, by a borrower to obtain a home mortgage. Points may also be called loan origination fees, maximum loan charges, loan discount, or discount points.
As you can see, a POINT could be called many things. The first thing you ask your Loan Originator is 'Does this CHARGE (no matter what the name) Lower The Interest Rate?'. If the answer is YES, then this is step one to writing off this charge on your taxes. Why? Because the fee is a direct result of a Lower Interest Rate. If the charge is just a charge paid to the Originator, then the fee is NOT deductible. You can not always tell by just looking at the Fees Breakdown.
In some cases the buyer (or homeowner that is refinancing) will pay a Loan Origination Fee AND a Discount Fee. In this scenario, it is very clear that you are paying a fee to drop the rate... although its not always obvious which is which. Ask your Loan Originator, make a note of it, and then discuss it with your CPA when the time is right.
What is extremely helpful for buyers today is that the new GFE (Good Faith Estimate) clearly states "Borrower Pays a Charge Of XXXXX.XXX For This Interest Rate Of XX.XX%". This was placed on the new GFE to make it very clear and helpful to buyers. As long as the buyer has received the GFE (which they always should) then it should also be clear that the paid a FEE to get the lower rate (Discount Fee).
My overall point to this post is to be sure to do your own homework before Reblogging a post OR before you spread the word to your buyers. Sometimes a post has all the information you need and other times the post is stating facts (or what they consider to be facts). Check it out for yourself!
I'll help you get pre-approved for your Texas home loan and even suggest some very knowledgeable and professional Real Estate Agents in your area of choice. If you are available to talk, I am available to listen. Give me a call or visit my website for more details.
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John R Cannata P#214.728.0449
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The views expressed on this site are mine alone and do not reflect the views of my employer.